Indian equities, currency and bond markets heaved a sigh of relief, along with other global markets, following the US Federal Reserve's dovish statement and its indication it wouldn't rush to raise interest rates from their current near-zero levels.
Stock markets, however, failed to hold on to gains as investors turned edgy due to the lack of positive domestic triggers and weak earnings forecast.
The rupee, however, ended higher against the greenback, though the gains were trimmed as the Reserve Bank of India (RBI) was seen intervening via state-run banks to mop up dollars.
The Fed on Wednesday dropped the pledge to remain "patient" in its outlook towards monetary tightening, paving the way to end the ultra-low-interest-rate era.
However, most global markets, which had turned cautious ahead of the Fed meeting, cheered the US central bank's decision to tread cautiously in tightening monetary policy due to weakened growth and inflation forecast in the world's biggest economy.
Following the Fed's overnight statement, the benchmark Sensex, too, gained more than 350 points, or 1.2 per cent, the rupee climbed to a two-week high and yields on the 10-year benchmark Indian government bonds softened.
But the market gave up all the gains ahead of the close as traders rushed to book profits amid resurfacing fears of Greece exiting the euro zone.
"The Indian market failed to sustain gains due to the lack of positive triggers in the near term. Not much is expected till the March quarter earnings announcement. The market will continue to trade negative to range-bound," said U R Bhat, managing director at Dalton Capital Advisors.
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